MsTabbyKats

This is a question from (yet another PITA that I would love to dump....very aggressive person) a client and it's a 2013 issue: The situation: She rents an apartment. She's been living there 20+ years. Her landlord wants to buy her out (so he can do something else with the building). Her question to me was: Is this long term or short term capital gains? Not running into this for years (if I ever did) I said...."I don't really know. But I would think it's ordinary income because you don't own the apt. And then I would have to see how her landlord reports the money". Her response was: My lawyer said it's a short term gain since I lived in the apt for over a year. My thought was...why bother me if you already know. But, my response was again.....it really depends on how it's reported. You and your lawyer don't decide where to put it. I have to put it in a tax return based on what information is sent to the IRS. Otherwise YOU get one of those nasty letters. I can't find anything official or even unofficial about this. In addition...it may be a "NYC thing"....where landlords are offered a lot for the property...and rental income is low (we have rent laws....a lot of people pay very low rents, including this woman because of the laws) so the landlord is more than eager to pay them to move. And...in addition, the tenant is always allowed to renew the lease. So the landlord can't just wait until the current lease ends. However, the tax code is federal...it's not written to accommodate specific regions....even if her lawyer "says so". Has anyone ever run into "lease buyout" situations. Again...I realize that this is probably a NYC specific situation....so I'm not expecting any concrete answers. Maybe just opinions... Thanks.......

Margaret- I'm going to make this simple for you. Do what's best for your client as long as it makes sense and doesn't go overboard. If the IRS doesn't like it, let them figure it out. For a moving expense....you have to move from one point to another point and start a new job in the second point. Congress makes the laws. The IRS is responsible for collecting the tax. What's written in all the pubs are the guidelines from IRS (not the laws)...and open for interpretation. That's why there is tax court and tax lawyers. This was directly from an IRS agent at one of those conferences.

Thank you Cathy! You "got it" right, perfectly! When the subject of his student loans came up, a few years ago, which is why he needed the innocent spouse form, I asked him "why didn't you pay it back over the course of 40 years?". His response was something like "because I think the govt should pay for my education". Now this is just nonsense. He's a little older than me. NYC, at that time, had an entirely free (very highly rated...very academically challenging) college system (now it's low cost and not so highly rated). We paid a $34 registration fee per semester. So the govt did offer him a free education. But, he chose a private institution. He had the option of "free".

Just my opinion...but it sounds like he lives in City B and has temporary living expenses in City C (training for 6 months is not a permanent situation). A to B is moving expense. C is temporary expenses I also see a lot of job search expense there...all legit as long as it's in the same field.

File a 1040-X For 1. Attach a letter from the bank showing the deposit (also...get 1099R to show the distribution) 2.$50 interest....just go with it...probably correct 3.Correct HSA stuff with the amended return 4.Should be resolved with the above corrections IRS may not talk to you...since you didn't do the original return. Have client call the IRS to tell them about the move, and that an amended return is in progress.

Merrill Lynch is correct. If the client never touches the money, then the firm from where the money is coming from doesn't need to issue a 1099-R.

Then do a C....with all the expenses (food, mileage, soaps etc)

What box is the income in on the 1099-Misc? If box 3...I'd put it on Line 21...and take the expenses on Schedule A. If box 7....I'd do a C...with all the expenses there

Lots of variables........... Generally...I don't add a fee. For a returning customer, if it's a return with nothing weird or unusual.....I just do it. If it's like the woman who on 4/14/11...called and said..."Sorry to do this to you but I'm giving you my 1099-B this afternoon" (which had about 1000 individual stock transactions) I say "No, you're not doing this to me because I'm not doing your return." However, if it's a new customer, I'd just raise my price.

Oh...I don't think they intended to have "a bad product". What would be in it for them? But, on the other hand, I think they have lost 99% of their client base. Even people who stayed with them probably wouldn't go back. I know I wouldn't, even if they offered me a free decade of software. Doug's going to have to start from scratch, with a new company name.

The CPA could have done one of two things: 1. Not entered the 1099-C 2. Clicked on something on the 982 that should not have been clicked on....and charged a hefty fee for this click As I said earlier...there is no "CPA shortage" in NYC. The fact that he had to "pound the pavement" to find a CPA...."at no small cost" to him....kind makes me think that many CPAs showed him the door.

I did his tax return...as it should have been done. I can tell you exactly what happened...no senior moment here (I have his 982 in front of me that I did for him). I called the IRS to discuss what I had to do to "make it go away". It seemed that if this had been "a business card" it would been forgiven (for the business)...but it wasn't....which is why the rep told me he should sell "the junk he bought" and pay the tax. We went over the 982 line by line...for an hour. There was no line....not even anything close to a line....that applied to his situation. Gee....I really feel like answering his last e-mail...just to vent...with his 982 attached!

I don't think there would be a point to it. As you said...the money has been distributed. The creditor isn't going to return it. Tell the client you're putting a note in their files about this...and next year you'll put the form in with the original return.

Note-The referral to locksmith is my husband's business. We live in the heart of NYC....there isn't a shortage of CPAs etc here. He probably had to look far and wide to find someone willing to do what shouldn't be done...at a high price.

And here is the response I just got: (note...his wife is Asian...but I never discussed his wife being Asian) re: I'm not going to get into "last year"....and what was ultimately done. I prepared your return based on the information I was given in accordance with IRS rules and regulations. Senior moment? You DID NOT Prepare my return last year! Bonnie you are so full of yourself. It is I who got into last year to bring all things current! You did get into last year my declaring yourself incompetant to do the filing necessary. And ya turned a brother Jew and human (HURST is my Patriarch name lineage) out to the cold---My cash has been good for 8 steady years Now you demand cash up front? How offensive and crude you have become in your old age- OBAMA CARE learned corporate not for prophet manners- May God forgive you this passover-- Only The catholics may demand cash up front in an offering basket at Mass-- from a loyal customer. It is customary in professionally run off the books businesses to refer out those accts you choose not to service--And NOt Throw them to the Lamb Eaters-- Always sensed your Asian American Racism demeanor! I over looked your deed last year--of refusing to do the proper filing and yet not refer us to a CPA to get the job done you declared yourself incompetant to do. Easy bucks only hey? And seeking to raise the instantly price? lol What a foolish bitter old woman you've become-- Perhaps rich! Your locksmith is your greatest asset--- Always has been--- Consider yourself terminated from TAX contract work for this family. AFG

Actually...I sent him this: (and i'm going to put his response in the next post) Hi Al- My husband and I are both alive and well. I'm not going to get into "last year"....and what was ultimately done. I prepared your return based on the information I was given in accordance with IRS rules and regulations. If you would like me to do your return this year, please e-mail or fax me your wife's W-2...etc..... I'll give you a price, but I'm going to need payment in advance of any work being done. Bonnie

So...here's the update on an e-mail I just got: Hi Bonnie, We've done our short form exclusively through you for 8 plus years now. Last year you turned us away due to our tax needing an extra form to cover the Credit card buy out settlement agreement with BA in 2012. We pounded the pavment absent a referral to a CPA. Well the complicated joint filing was done last year at no small cost to us. You've never not returned my call promptly thus I fear tell you or you husband are ailing. Hope its not serious. Looking to get our short form done again by you or a referral if you have re-tired. Please advise. Best Regards This "I turned him away due to an extra form" is just nonsense. I guess I'm either retired of dead. You see how unusual it is for me not to get back to someone within 5 seconds!

The result...when speaking to the IRS....about his "assets"...was...."Tell him to return the "junk" he bought and he'll have money to pay the tax. (And that part I remember distinctly.) I think you don't get it....this man has been avoiding "financial responsibility" all his life. And I was sick and tired of wasting my time in aiding and abetting his annual nonsense. I was happy to lose him. I don't want him back. But then again, in normal years his return is very easy money (1 W-2 and innocent spouse forms). Please don't be naive. I can just about guarantee that he went to someone else and did not show him the 1098-C....or the CPA filled out the return checking the box that the debt had been dismissed in a bankruptcy. Not everyone has the time or patience to do the research that I do. It takes one second to "click an X". I'm sure the 982 wasn't filled out, because there was nothing to fill out. He's a deadbeat. He's always been a deadbeat. He'll always be a deadbeat.

I went over "everything" with the IRS. The man's wife works and makes about $75,000 as a NYC employee. He is able bodied, but chooses not to work. They don't own anything....just tenants. They have no expenses...other than rent and food on the table. I just checked the return from last year...and the debt was actually in his wife's name. It was $32,000. The debt wasn't discharged as a result of bankruptcy. He said..."they were looking at real estate...and were offered a line of credit". I said...."but did they tell you that you had to use it?" The $$$ was spent on just typical nonsense....and probably sent whatever they bought back to the wife's family in China. There is no way the debt could be legally excluded. There are no obligations...other than his student loans from 45 years ago. He just didn't want to pay the tax. Period. This was all discussed when I spoke to the IRS. If the CPA used Form 982 he obviously didn't know how to use it properly. FYI-I'm very thorough. If I'm not sure of something I'll spend hours researching it. I just don't blindly fill out forms...because I don't want anything coming back at me. Obviously I don't remember who I spoke to at IRS...but it wasn't "the 1st rep who answered the phone". Most likely it was the dept that specialized in debt cancellation.

Yes...I checked for an hour with IRS. It was taxable....no question about it. The guy is a big PIA. It really got old to hear him tell me how to do my job every year.

I had a client for about 10 years that I always had issues with....... Example: He needs to take his 2nd apt as a deduction because his wife is a frail little thing, and cannot take the subway to work. So, they need a 2nd apt by her job. (No...I didn't........) Moving on...last year: He had a 1098-C showing cancellation of credit card debt of $40,000. Of course he got mad when I told him he had to pay tax. I called IRS just to triple confirm I was not hallucinating. I did the return...etc....and then he said he was going elsewhere, to someone who would leave it off. Oh...how happy I was. I wouldn't have to bother with him again. Lo and behold...he just called me (left a message...I was out) and said he wanted me to do his return....he had to go to a CPA last year etc........but he wanted to come back to me My choices: 1. Not responding 2. Raise his price and tell him he has to pay upfront BTW...this man is almost 70 and still hasn't paid back his student loans, which is why he needs the injured spouse form!

You need a hot bubble bath too.........

Take a nice long bubble bath......pamper yourself. When people ask me to do anything not related to tax work I tell them I will gladly help...after 4/15. They respect your expertise....that's why they ask you to do these things.

LOL....no, you don't get the point. I have everything...and everything right in front of me. I double check...triple check....check the name, make sure the refunds match...everything. I just have this fear that one day I'll open the wrong return and e-file it. It's never happened...because I am uber -conscientious. But mistakes happen...... Whatever....I also have an irrational fear of mice. I used to work in a lab with white mice...but freak out if I see one of those grey critters race across the floor.

So, what would you do?